Federal Circuit

Some consider him the country's greatest inventor since Thomas Edison. He holds more than 550 patents. MIT gives out a $500,000 award that bares his name to an outstanding inventor every year. There is even a center named after him at the Smithsonian Institute. For many, Jerome Lemelson, who died in 1997, seems to embody the innovative spirit of America.

But his is not an unblemished legacy. There is another side to Lemelson, one that his foundation tries to downplay. Reaping more than $1.3 billion through licensing fees from more than 900 U.S. companies since the mid-20th century, Lemelson is a tyrant in the eyes of corporate America. He is considered the godfather of patent trolling and the most flagrant exploiter of the U.S. patent system in history.

Along with the help of his outside attorney, Gerald Hosier, Lemelson brought the behemoths of industry such as Ford and Motorola to their knees. Through a technique known as submarine patenting, Lemelson coerced entire industries to fork out licensing fees for technology they had been using for years. Some companies tried to fight, but to no avail. Many others decided to give in rather than losing even more in costly lawsuits.

But Lemelson got greedy. Companies began banding together to pool resources. A battalion of attorneys frantically researched for a solid defense to take down Lemelson once and for all.

Finally on Sept. 9, the U.S. Federal Court of Appeals delivered the ruling that corporate America had been waiting for. The Patent Court held unenforceable two of Lemelson's most notorious patents, one involving bar code equipment and the other "machine-vision technology." Corporations across the country rejoiced.

"The major benefit is that there were still several hundred companies, maybe as many as 1,000 or more, that were still exposed to the Lemelson patents," says Jesse Jenner, a partner at Ropes & Gray in New York who represented the eight companies that manufacture bar code technology and Cognex Corp., a leading manufacture in machine-vision technology. "Lemelson was seeking a billion dollars or more in licensing fees from these companies. Hopefully this will put an end to that, and those companies will be left free of these patent claims."

Stealth Attack

Lemelson's legacy began in 1954 when he filed a patent application involving bar code technology. Two years later, he filed a second application for his machine-vision technology, a robotics innovation that allows machines to determine whether a product meets certain preprogrammed standards. Although he never created the inventions outlined in the patents, he still held the rights to the ideas. Technologically, industry hadn't even reached a point where his ideas could be applicable.

Yet Lemelson knew the patent laws and how to exploit them. Before 1995, after somebody filed a patent application, the patent had a 17-year term before becoming part of the public domain. However, a patent holder could extend that time indefinitely by filing amendments to the original patent. Each amendment added 17 years. There was no limit to how many continuation applications could be filed.

"You can see what somebody might figure out," Jenner says. "If they keep filing continuation applications, they would have overlapping patents issuing, each of which would have its own 17-year term that would extend out for a long time. And Lemelson did that so the patent chain extended out virtually indefinitely."

This method allowed Lemelson to retain the rights to his patents for more than

50 years--way beyond the 17-year limit. But there was more to his scheme. His initial patents were generic, allowing for additions in continuations that could incorporate real-world uses of his inventions. This allowed him to wait for industries to do the work of actually creating the technology he roughly outlined in his applications and then sue them for infringing his idea. Companies that fell victim to Lemelson's patents include Boeing, Dell Computers and General Electric.

"It is like someone following trends in the industry and putting in claims to cover them," says George Sirilla, an IP partner at Pillsbury Winthrop Shaw Pittman in McLean, Va. Sirilla represents members of the National Retail Federation (NRF) in an infringement case in Phoenix that Lemelson's team filed. He also wrote an amicus brief on behalf of the NRF.

"If you keep applications pending in the patent office--a string of them based on some original application that is broadly worded--and you follow developments and innovations in industry, you may be able to capture companies with some craftily worded claims. And that is what Lemelson did," Sirilla says.

This method is known as submarine patenting. According to Jenner, if Lemelson invented anything, it was this.

"It is one thing for somebody not to know about an application for 18 months," he says. "It's another thing for people not to find out for 40 years."

Ultimate Success

That technique has been a thorn in corporate America's side for more than 50 years. But the Lemelson machine finally came to a halt when Jenner fought back with a doctrine called prosecution laches. Jenner argued that although Lemelson's patents were enforceable under the letter of the law, his delayed enforcement of those rights rendered them unenforceable as a matter of equity.

Because Lemelson's patent trolling was not illegal per se, Jenner knew prosecution laches, though rarely allowed in the patent context, was his only hope.

"Prosecution laches means you waited too long," Sirilla says. "You really played games with the patent office system. ?? 1/2 You have situations where it is not fair to let people get by even though they are complying with the literal language of the law."

The court agreed with Jenner and ruled Lemelson's patents unenforceable. Lemelson's legal team has since filed a petition for an en banc rehearing.

The long-awaited ruling frees companies from the threat of costly legal battles and licensing fees. The decision is particularly good news to 500 defendants in a case Lemelson's foundation filed in Phoenix. A judge stayed that suit pending the Federal Court's decision. Among the companies Lemelson was going after were Intel Corp., CompUSA Inc., Nordstrom Inc., and other companies that used bar code and machine-vision equipment. Now that the patents have been ruled unenforceable, the suits will most likely be thrown out.

"It is always good to see a patent opinion from the Federal Circuit that makes sense from a legal perspective, a business perspective and a policy perspective," says Blair Jacobs, a partner at Sutherland Asbill & Brennan in Washington, D.C., who represents Cascade Corp. in the Phoenix case. "This ruling was truthfully the coming together of the retailers and the combining of resources, which lead to the ultimate challenge and the ultimate success."

As a result of the ruling, companies now can use prosecution laches in cases where a patent troll is abusing the patent system.

"The court essentially said that only under the rarest of circumstances where you have this kind of extreme abuse of the system should the defense be applied," Jacobs says. "It really does require a fairly unique set of facts, which were applicable to the Lemelson case."

Fortunately, companies probably don't have to worry about facing too many more trolls as audacious as Lemelson. Thanks to changes to patent law in 1995, the flaws in the system that Lemelson used to his advantage are no longer possible. Patent holders can still file continuations, but ownership of a patent can only extend

20 years past the initial filing date.

"This is the end," Sirilla says. "There are no more Lemelson bar code patents to worry about."